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Question 2: (16 marks) Wastewater Ltd acquired an item of plant on 1 July 2016 for $3 660 000. When the item of plant was acq
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Answer #1

Question 2)

Date Particulars Dr Cr
01/07/2016 Plant a/c $3660000
To Bank $3660000
30/06/2017 Depreciation a/c $1098000
To Plant a/c $1098000
30/06/3017 profit and loss a/c $1098000
To Depreciation a/c $1098000
01/07/2017 Plant a/c $234600
To Bank $234600
30/062018 Depreciation a/c $1242933.33
To Plant a/c $1242933.33
30/06/2018 Profit and loss a/c $1242933.33
To Depreciation $1242933.33
01/07/2018 Plant a/c $344900
To Bank $344900
30/06/2019 Depreciation a/c $890685.598
To Plant a/c $890685.598
30/06/2019 profit and loss a/c $890685.598
To Depreciation $890685.598

Question 3)

The amount of research and development need to charged to profit and loss account as and when incurred unbuttons the development expenses can be treated as capital expense only if reasonable certainity of future benefits exist and are realisable.

In the given case $50000, $30000, $90000 are to be charged to profit and loss account immediately and $190000 need to capitalized and written off over the period of benefit realization.

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